How to pick target texture image for baking?
For Blender internal renderer, the important thing (as I just learned) is to understand Blender assigns textures in the Image Editor on a per face basis. So it's not enough to just load the texture in your UV/Image Editor; you have to load the texture while having the relevant UVs selected also. This way you match the image with the UVs and the image becomes the target for baking.